CBO: Interest on debt snowballing

Behind the fine print of new budget estimates released Tuesday is a growing — some say brutal — competition between discretionary spending by Congress and fixed interest payments owed on the growing government debt.

Indeed, the steady increase in annual interest costs is a surprisingly big reason why the Congressional Budget Office sees deficits rising in the second half of the coming decade.

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Accumulated interest payments from 2014 through 2018 are $1.76 trillion under CBO’s new baseline. Interest payments for the second five years are more than double that or about $3.64 trillion.

The growth takes place in a period when CBO is forecasting a steady ratcheting down on annual appropriations in hopes of reducing future deficits. On top of cuts enacted in 2011, the new baseline assumes that a new round of across-the-board cuts scheduled for March 1 will go into effect.

The end result is that annual interest costs are predicted to have overtaken defense spending by 2020 even allowing for an extra $100 billion annually for overseas contingencies.

And there is a dramatic change in the ratio between interest payments and total discretionary outlays to run the government — including domestic programs.

In 2013, CBO estimates that discretionary outlays will total $1.2 trillion vs. $224 billion for interest: a better than 5-1 ratio. By 2023, discretionary outlays will be $1.42 trillion, according to CBO, while interest payments will have risen to $857 billion.